The Alibaba Group and Online to Offline (O2o) Sales Case Solution & Analysis

The Alibaba Group and Online to Offline (O2o) Sales Case Study Solutions

Introduction

Alibaba group is the largest mobile & online commerce company all around the globe in means of gross merchandise volume. It was founded as an online trading platform in 1999 by Jack Ma. The E-commerce platform caters both global and Chinese consumers, though the majority of the transaction is generated domestically. China had one of the leading position with Alibaba being ranked 2nd most valuable retail brand of the world in 2016. An expanding suite of services as well as tools has enabled the suppliers and the buyers to not only establish presence on the internet, but also to enjoy an increasingly secure and seamless online workflow.

Certainly, one of an effective business strategy is O2O commerce, which has drawn the customers from online channels to physical stores. The strategy has identified the customers in the online segment through internet and emails advertising. Furthermore, O2O has used a variety of approaches and tools in order to entice the customers to leave the online area. Significantly, Alibaba group has been experiencing a greatest success in O2O because the massive ecosystems have created a network effect that has provided mass advantage in terms of attracting users & customer and not only this, but it has also enabled Alibaba to fulfill the customer’s demands effectively and cost-efficiently.

Online to Offline (O2O) Business

There are many customer who want to have an experience that would allow them to touch, hold and try the products. Also, there are many shoppers who still relish the experience of walking into the store and getting out of them with merchandise. The O2O commerce let organizations treat offline and online channels as complementary rather than competitively. Since the company believes that a foothold in a traditional way is one of an essential key to the future success and growth, hence, it should develop O2O plan for the new retail that must involve the usage of technology in order to upgrade the retail sector in China. For this, the company should develop eco-system, bring creativity, and increase the efficiency in the workforce. In addition,  strategic partnership, business expansion and an improved mobile platform should be the key considerations of the company. Also, the company should harness the potentials of an immersive technology. (Yang, 2016) The strategic actions requirement of the company in order to pursue the O2O services are as follows:

Business Expansion

The company should make strategic acquisitions and investments for expanding its use base, adding complementary technologies and products, improving its cloud computing business and further strengthening its eco-system. The company should make strategic acquisitions and investments regarding digital media, O2O services, logistics services and category expansion.

The company can extent its service offers to support the primary care system in China, using its immense reach in order to solve the inequality of resources between the regions, hence bringing a new standard for care via online doctor consultations. The secure and an easy online access to the radiology re posts and medical images would provide specialists and physicians with holistic view of the condition of each patient and help to improve the clinical collaboration for treatment and diagnostic decisions. The new medical imaging cloud platform would most likely be a significant expansion to the fast growing health infrastructure of the company. The company should establish an ecosystem of services for patient, doctors and 3rd party medical service providers that would improve the efficiency and quality of the medical services.

In addition, the company can launch an online and mobile payment app that would promote the smart tourism platform. The platform should have an ability to connect the Chinese tourists with travel agencies, merchants, and airports, hence giving users an easy and convenient access to intuitive local services and offers, and merchant the ability to target potential clients. Since, the most Chinese tourists own smartphones, so there is a future opportunity for the company to deliver an exceptional travel experience. In contrast, the company can keep the profile of doctors or specialists and database of hospitals in Alibaba’s database. By doing so, the commission revenue would increase the profitability of the company. Also, the company can facilitate the tourism industry by providing various services such as hotel bookings, updating and promoting visits, and ticket bookings and trip packages on the website of the company.

Creativity and Innovation

Open innovation is essential for the survival and growth of the company, in forthcoming years, so the company should enhance the industry knowledge as well as technological capabilities in order to meet the ever growing demands of customers and to compete in the fierce competition in the market (Ulrich, 2004). As, the customers look for the refreshing ways of experiencing real time services, marketing and wider products range; the company should expand partnership with foreign and domestic brands, also it should establish platforms in order to keep improving its customer service efforts and encouraging the content generation (Backaler, 2018). For the purpose of handling the volume, the company should leverage nouveau technology that includes artificial intelligence and cloud management in order to fulfill thousands of orders (Hardy, 2018).  Also, the company should lay open innovation strategies via external resource integration. Alibaba should develop a full partnership with food chain giants and create an unprecedented version of virtual online stores in order to provide personalized experience to the customers.

Furthermore, the company should use creative technical devices such as smart database system, robots to boost business performance for customer to customer (C 2 C) customer, business to customer (B 2 C) and business to business (B2B).

Mobile marketing platform

It is suggested to fully utilize the mobile platform by purchasing the new application for the customers in order to provide an ease to them. The company should launch its mobile marketing platform that must provide intelligent content marketing solutions in order to enable the emerging business and established brands to reach to the right set of audience at the right time. It should direct its focus in engaging with business across various industries such as Online Travel Agent (OTAs), automobile, e-commerce, IT, education, and entertainment and consumer electronics sectors. Also, it should focus on several emerging businesses which have been seeking cost effective mobile marketing.

In addition to this, the company can also purchase new mobile application that can be costly but could increase the productivity and efficiency of the business in the long term. Additionally, it is to suggest that the company can increase the size of business for mobile platforms such as software, apps and applications that would require one customer of B2B that can be used to another customer of B2B model.

Ecosystem

The company should develop strong ecosystem having the potential of resulting in greater success for the company. It should improve itself by improving its performance in website business and logistics. The company should improve its logistics to make the customer satisfied from its online to offline services. The company should also strike up meaningful partnership with the network of several freight forwarders and logistics companies.

For the beer expanding global strategies or plans, the company should improve its logistics, it should explore partnerships with giant logistics companies with the particular goal of developing the cloud-based logistics services. This in turn, would results in strong channel of distribution and an increased number of warehouses.

Workforce efficiency

Since, one of the major part of successful business is its human resource, therefore it is recommended that the company should adjust the relevant management strategies. The company should strive to enhance the trust and loyalty of the employees according to the changes of external and internal environment from aspects of the salary structure, employee training, dynamic allocation of human resource and labor relation. These human resource strategies would most likely enhance the performance management as well as provide help in achieving the long term growth and development. As training and development program is the prime opportunity that can be explored for an expansion of the employees’ knowledge base. The company should design training and development programs in order to improve employees’ performances. The employee should be motivated to work actively and collaboratively for the purpose of attaining the target goals, thus helping the company to remain a market leader and a strong competitor within the industry. Not only this, the robust training and development program would result in improved employees’ morale and satisfaction, background knowledge and consistent experience as well. The productivity of employees and innovation in new products or strategies would increase. Also, this would enhance the company’s profile and reputation in both short and long term.

Also, the company needs to hire employees in order to build a new logistic network to reduce the risk associated with Offline Company. Furthermore, if the company opts to have its own strong logistics network with the website for online customers, the company would be most likely to succeed by using online to offline (O2O) business model.

Financial strategy

Certainly, the investment opportunities are gateway to the future success. The company should explore and capture the opportunities of investments for long term growth and success of the company. It is imperative to note that the online Chinese industry has been in the developing phase and there is a likelihood that it would be growing by 60 percent of the annual compound rate. Also, the larger portion of Chinese service industry has not been tapped, thus providing an opportunity to the company for tapping the untapped markets and investing in the service sector so the company can flourish or grow in the forthcoming years. Afterwards, the company can have a first mover advantage as well.

In addition to this, the risk mitigation strategy would result in variety of benefits to the company. The steps included to mitigate the risk are as follows:

Investing in the untapped service markets for long term. Also, the simple future value formula is used to calculate the future value of the gross volume of merchandise, resulting in 576.82 billion, which depicts that the risk of company’s investment is certainly low. Furthermore, the present value is calculated at 30 percent annual compound rate for the year 2020, then the present discounted value of the company results in 1616.15 billion, hence supporting the company to explore or capture the opportunities in untapped markets.

Marketing strategy

Evidently, it is significantly important for the company to attract new customers and retain the current customers, which requires the company to strengthen its position in the market and pursue marketing efforts in order to achieve marketing objectives. When the highly established brands will use Alibaba website to market their products, the customers would come to know about the mission and business type of the company, which would allow direct marketing and advertising. It is recommended to use tag lines and labels when posting on online platforms, for the purpose of gaining the attention of the customers or viewers. It should be updated with the passage of time on the basis of occasions, sessions and events on the international levels. By doing so, the brand image and reputation of the company can be strengthened in the market.

Competition and Offline Quality Concern:

It is important for the company to increase its market size and product line, for which, the company should follow diversity growth strategy to control the quality issues and to compete in the head-to-head competition. To remain a market leader and to beat the competition, the company should complement variety of growth strategies to sustain the competitive advantage. The company should establish the adequate credit guarantee system for the purpose of increasing the user scale and to build the foundation for the customer trust and loyalty.

In addition to this, the company should immensely strive to distinguish itself from the market competitors or substitutes. It should use its unique advantages which are high efficiency and low cost in order to compete with the physical stores. The company has the ability to draw in a larger number of purchasers and sellers, so it can change the game rules in order to enhance its competitive strength and market position.

By investing in the online to offline business model, the sales would increase, allowing the company to reach the broader potential customers of prospective new customer base. It would also result in significant returns for the company. By driving the online customers to visit the physical stores would most likely increase the overall expenditure of the customers, hence, increasing the profit margin of the company.

In addition to this, it is recommended that the company should open its network of distribution and formulate human resources strategies to retain current employees and attract new employees. The employees should be highly motivated to work collaboratively to run the operations of distribution network. To reduce the quality concern, the company should have its own distribution network, so there wouldn’t be any intermediary between the company and the customers.

Also, the distribution network would allow the company to gain the competitive advantage over competitors, and by interacting directly with customers; the company would retain a massive control over its performance and product/service. Not only this, it would also allow the company to collect the valuable data on buying habits of customers.

Appendix A

Valuation of company
Growth 0.1
GMV  in billion 296
year 7
future value ?
FV PV*(1+g)^n
FV 576.8202616
value the company
Growth rate 0.1
Compound rate 0.3
n 7
CF
pmt 576.8202616
solution
present value pmt*(1-(1+r)^-n)/r
present value 1616.315138
Posted in Harvard Case Study Analysis Solutions